Black money: Spain's 'euro effect'

MADRID, Spain (CNN) --The introduction of the euro has some Spaniards rushing to unload pesetas long out of the view of tax inspectors.

They call it dinero negro -- black money. It looks just like regular cash, except it's not declared to the tax authorities.

Black money is nothing new in Spain. But this year authorities say it's being used for a buying spree -- homes, luxury cars and jewelry.

"We are seeing increasing consumption in buildings, in car sales and so on, and we are seeing an end of the year that is much, much better than we have expected," says Miguel Angel Fernadnez Ordonez, a former government official.

Spain's second-largest bank, BBVA, estimated that $8.5 billion in cash could be coming out of hiding this year. The bank calls it the "euro effect."

Many Spaniards fear tighter financial controls when the euro replaces the peseta as the currency here. So spending the black money now may help launder it.

"Officially we don't know about black money," says Antonio Carrillo, CEO of Look & Find Realtors. "We simply arrange a housing sale between the buyer and seller, and we advise them to strictly follow the law."

But when the real estate agent leaves the room, the buyer and seller often do a little business on the side.

Here's how it works. There's an official price the buyer and seller report to the tax authorities. And then there's the real price, which is higher. The difference is paid in black money.

There are double-digit sales increases this year for Mercedes, Audi and BMWs -- way above the 3 percent rise in car sales for all brands. Could it be due to black money?

"They say black money could be buying luxury car sales, but I don't believe it," says Luis Herranz, owner of Herranz BMW. "A car has documents and an invoice. I don't see how black money could be involved."

One dealer says only two clients have paid in cash this year for his highest-priced cars. But the government says when it comes to black money, it's not an open-and-shut case.

"We really have special plans to collect information and to use from now on, probably next year, the first six months of next year, to select taxpayers to control," says chief tax collector Salvador Ruiz.

While the tax agency has detected a 40 percent increase this year in all kinds of tax fraud, including black money, officials say Spain wants a smooth transition to the euro.

Officials insist they aren't looking the other way, but tackling black money fraud may have to wait.